Final K1: Sale vs Liquidation and 1250 Gain Clarifications

Forum|Forum|3 years ago
April 11, 2023
2 replies
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@Rick19744and any other with expertize,

I received a Final K1 (different from the one that I already asked about). I have the basis caculated. I have a few additional questions about enterering the K1 data into Turbotax.

First, this was just a simple deal where we sold the single apartment building owned by the parternship. I assume this would be considered a "sale" not a "liquidation." Correct?

Second, line 9c shows an Unrecaptured Section 250 Gain of 10,211. I've duly entered this in the appropriate field for line 9c. However, when I'm entereing the information for the sale, I get this screen:

Should I enter the 10,211 figure from the K1 line 9c in the box above in the picture that asks for 1250 Gain?

Similarly, later in the software flow, I get the following two screens:

The K1 doesn't explicily describe the 1250 gain as coming from a disposition of an interest in a parternship. So wondering if I should put yes or no on the screen asking that question and -- if yes -- then put the same 10,211 figure in the field asking about the amount from a disposition in a partnership interest. Thanks for any assitance you can provide,

Best answer by Rick19744

My thoughts on your questions:

You didn't sell your partnership interest. While the partnership sold its only asset, it then reported this gain to the partners and then liquidated.
Based on the above, I would think you would get different boxes and questions if you change your response to "liquidated"
The unrecaptured section 1250 gain just belongs in the section when you report your K-1 information. This amount will then be used by TT when determining your gain; as unrecaptured section 1250 gain is taxed at a maximum of 25%.
Let me know if after you change the disposition selection you still have questions.

Rick19744Answer

Employee

My thoughts on your questions:

You didn't sell your partnership interest. While the partnership sold its only asset, it then reported this gain to the partners and then liquidated.
Based on the above, I would think you would get different boxes and questions if you change your response to "liquidated"
The unrecaptured section 1250 gain just belongs in the section when you report your K-1 information. This amount will then be used by TT when determining your gain; as unrecaptured section 1250 gain is taxed at a maximum of 25%.
Let me know if after you change the disposition selection you still have questions.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

TreyAuthor

@Rick19744, thanks for your response. After I click "complete disposition," I get several options to choose from, incluidng both "sold partnership interest" and "liquidated parternship interest." Regardless of which I choose, I get the same screen afterwards:

I agree with your logic and will select liquidated. Thanks for clarifying about where to put the 1250 gain in the software as well.

I hope this will be the last of my questions on K1 sales, tax basis, etc. this year. I want to thank you for all your help. Truly appreciated.

Rick19744

Employee

No problem. You are welcome.

*A reminder that posts in a forum such as this do not constitute tax advice.Also keep in mind the date of replies, as tax law changes.

Mike9241

the k-1 is reported exactly as is. the disposition i see raises a question. generally if you were always in the partnership and there were no adjustments to your ownership the liquidation proceeds you receive should equal your tax basis so there would be no gain or loss .

simple example

you put in 5K as capital contribution

income reported over term of partnership $4K

distributions other than liquidating distribution 6k

leaves a basis of 3k and that's what should have been received upon liquidation - maybe even les since sometimes there's a holdback for potential late bills or adjustments.